When iconoclasts join the mainstream

Small firms boasting of their counterculture style upset some of the faithful when they ally with the big players

March 23, 2006|By ANDREA K. WALKER | ANDREA K. WALKER,SUN REPORTER

Tom and Kate Chappell left corporate jobs in Philadelphia in 1968 to move to the woods of Kennebunk, Maine, where they made their own soap and other natural care products.

Their enterprise evolved into Tom's of Maine, a natural products company the couple started in 1970 that grew into, among other things, the nation's largest producer of natural toothpaste. The company reveled in thumbing its nose at much larger competitors that used additives in their toothpaste. But this week, Tom's crossed enemy lines, so to speak, when it announced its sale to toothpaste giant Colgate-Palmolive Co. for $100 million.

"I think some customers will be categorically opposed to Tom's of Maine becoming part of any large global company," Tom Chappell said in an interview yesterday.

"But I think a large percentage of our customers will want to continue to use a product that has become a part of their lifestyle. And they're going to understand and celebrate this decision with us," he said.

The challenge for Tom's confronts many companies - from Starbucks to Southwest Airlines to Pixar Animation - that begin as freewheeling underdogs to corporate America, but someday grow into, or get bought by, big business itself.

Can a company whose appeal is iconoclastic continue to play the counterculture card as a Fortune giant?

The Chappells, who are retaining a 16 percent share in their company, said maintaining its image was a priority in considering Colgate's offer.

They asked Colgate to include several covenants in the contract to ensure independence for Tom's of Maine.

Tom Chappell will continue as chief executive officer for three years and as part of the company for five years. Kate Chappell will remain a consultant and the company would be an independent subsidiary of Colgate. All manufacturing and distribution will continue from Maine. The company's 90 products, from dental floss to deodorant, will retain their unique packaging and not outwardly carry the Colgate-Palmolive name.

The Chappells said they were comfortable with the deal because Colgate owns two other companies that are mostly independent of its parent - Hill's Pet Nutrition, maker of the Science Diet brand of pet food, and Gaba International, a maker of oral care products.

"I think obviously some of our customers are going to wonder, but they'll keep faith because we have a relationship of trust with our customers," Tom Chappell said.

The question of a smaller company selling out reared up last week, too, when L'Oreal cosmetics announced it was spending $1.56 billion to buy Body Shop International PLC. Founded 30 years ago, the English company was known for selling lotions, creams and cleansers that are not tested on animals, for promoting fair trade and for using local farmers' products.

Critics quickly accused the Body Shop of selling its soul. In fact, Body Shop's owner, Anita Roddick, once claimed L'Oreal was part of a conspiracy by cosmetics manufacturers to make women feel insecure, according The Financial Times of London.

Durham, N.C.-based Burt's Bees Inc., which sells natural lip balms, toothpaste and hand creams made from minerals and plant ingredients, was similarly criticized last year when it sold an 80 percent interest to Manhattan buyout firm AEA Investors.

The odds that a company can keep its identity after a merger are low, some analysts and business experts said. Larger companies eventually blend their corporate culture into their smaller subsidiaries because it's more efficient, such as using one advertising and design company for all parts of the company.

"Many times what you see is that the uniqueness gets watered down when a smaller company becomes part of a larger corporate culture," said Joe Duffy, chairman of Duffy & Partners, an international design firm based in Minneapolis.

Duffy was part of the design team for Classico spaghetti sauce more than 15 years ago. He said the sauce was sold in a Mason jar and was much more distinct from other brands on the market. Borden Foods eventually bought the company that owned the sauce and now it blends in with the rest of the competitors, Duffy said.

The $1.7 billion acquisition of the Snapple beverage line by Quaker Oats in 1994 was eventually judged a flop because Quaker struggled at how to market the New Age beverage. Quaker, which eventually got swallowed up by PepsiCo Inc., tried to market and sell Snapple beverages much like it did its Gatorade brand. But it lost the quirky marketing pitch that had made Snapple a hit.

Quaker in 1997 sold the company to Triarc Companies, which turned Snapple around by appealing to a young crowd. The beverage company today is a subsidiary of Cadbury Schweppes, the makers of Dr Pepper and Seven-Up.

Ben & Jerry's Homemade Inc., on the other hand, the Vermont ice cream company known for its environmentally friendly practices, seems largely to have been able to maintain its hippie image after it was bought in 2000 by Unilever PLC, the British-Dutch food giant.